Goodrich, Uniroyal Merge Units

NEW YORK — B.F. Goodrich Co. and Uniroyal Inc. agreed Tuesday to combine their tire businesses in a joint venture designed to survive increased competitive pressures, especially from imports.

The new company, which will be called Uniroyal-Goodrich Tire Co., will have sales of about $2 billion and be based in Akron, Ohio. It will be the second-largest tire company in North America after Goodyear Tire & Rubber Co., displacing No. 2 Firestone Tire & Rubber Co.

At a press conference here, officials of both companies said the venture was a natural fit, since each tire operation complements the other:

Uniroyal concentrates on the original equipment market and is a big supplier to General Motors Corp., while Goodrich focuses on the replacement tire market.

The new company, which will control about 18 percent of the market, will continue to manufacture the existing lines of Uniroyal and Goodrich brand tires. The tires will continue to be distributed through each company`s dealer network.

``The company is being created from two large, profitable tire operations, and the whole will be substantially stronger than the parts,``

said Patrick C. Ross, president of Goodrich and chairman and chief executive officer of the new company. Goodrich and Uniroyal will own equal parts of the company.

It was unclear how the deal got started. Goodrich Chairman John Ong said the two companies have been talking since July or August. ``We approached each other simultaneously,`` said Joseph P. Flannery, Uniroyal chairman. ``It was a sensible idea, and both of us thought about it at times in the past.``

There was speculation, however, that the deal was the result of pressure on Goodrich from the investment community to improve the performance of its stock. Goodrich recently acknowledged that it paid so-called

``greenmail,`` or a premium price, to buy back stock from corporate raider Carl Icahn. And Uniroyal went private last year in a leveraged buyout to foil a takeover attempt by Icahn.

But Ong said ``Wall Street manipulation`` had nothing to do with the merger. ``This deal was not put together by the raiders,`` he said. ``It was put together by management who saw the handwriting on the wall and had been separately exploring alternatives.``

The handwriting said that ``only large, powerful competitors``

survive, Ong said.

Ironically, the industry is the victim of its own advanced technology: Longer-lasting tires cause the replacement market to remain stagnant. The industry is also dogged by excess domestic capacity, while imports continue to flood the market. Imports account for about 25 percent of the market, compared with 7 percent 10 years ago, according to industry estimates.

The joint venture caps a year-long restructuring program for Goodrich. After the merger, which is expected to take within four to six months to complete, about 80 percent of Goodrich`s sales will come from specialty chemicals and polyvinyl chloride, compared with about 40 percent before the joint venture.

Middlebury, Conn.-based Uniroyal, meanwhile, will only have its specialty chemicals business left, and it`s for sale.

Officials of both companies said they don`t expect the deal to create any antitrust problems.